Finland and Belgium have joined a growing list of countries restarting export credit cover in Ukraine, offering a welcome boost to Kyiv’s reconstruction plans.

In recent weeks, Belgium’s government ordered its export credit agency (ECA), Credendo, to resume business in Ukraine and apportioned €100mn in additional capacity for the market.

€75mn is being ringfenced for short-term transactions with a risk duration of up to one year and €25mn for longer-term transactions.

While there is “no end in sight [to the war]”, the Belgian government “considers it essential to participate in the efforts to rebuild Ukraine and to enable the export of daily consumer goods Ukraine needs,” Credendo says.

“That ceiling could later be raised based on positive experience,” Credendo says, while noting it will cover up to a maximum of €15mn per individual transaction.

“Where necessary, guarantees from Ukrainian banks or authorities will be required,” it adds.

In late December, Finland’s government pledged €50mn towards compensating its national ECA, Finnvera, for losses incurred when covering exports to Ukraine.

Finnvera must tap the fresh capacity in 2024 and is expected to focus on short-term credit insurance as the agency works to reacquaint itself with a market where it has been off cover for nearly two years.

The targeting of short-tenor deals will allow the ECA to gain “some experience and a sense of how things work in this difficult situation”, says Eeva-Maija Pietikäinen, head of trade finance and country risk management at Finnvera.

“We would not do this [provide cover in a war-affected market] without the direct compensation from the government. Our view is the country risk is still high and not doable under our normal risk-taking approach, but for special reasons, we are now able to,” Pietikäinen tells GTR.

The announcements offer a welcome boost to Kyiv’s modern-day Marshall Plan, which according to the World Bank, could cost upwards of US$411bn and will require sizeable foreign support.

They also highlight how European ECAs have reversed their policies over the past 18 months, with most agencies having cut cover for Ukraine when the country was placed in the OECD’s highest risk category, group seven, in the early weeks of the Russian invasion.

Poland’s Kuke re-entered the market in June 2022, while agencies from a raft of nations, including France, the UK and Denmark, all reinstated cover for Ukraine in 2023, even though war risks and the threat to property and life remain heightened.

In the past fortnight, Russia has intensified its drone and missile strikes across Ukraine, killing dozens of civilians and damaging residential areas far from the frontline, including Kyiv.


The Finnish plan

Prior to Russia’s full-scale invasion, Finnvera had a relatively modest level of activity in Ukraine.

“Finnish companies were more concentrated on the Russia side. We had exposures of nearly €1bn in Russia and a few million on the Ukraine side,” says Outi Homanen, a senior advisor on Finnvera’s country risk team.

But on December 21, Finland published the first phase of its Ukraine Action Plan which outlines how it could wield export credit and development finance to back Kyiv’s reconstruction.

In an amendment to its 2024 budget, the government pledged to compensate Finnvera up to €50mn and gave its DFI, Finnfund, a €25mn capital increase to enable “large-scale investing in Ukraine”.

Finnvera has already received “some applications” for short-term credit insurance from a variety of sectors, including producers of consumer goods and building materials, the agency says.

It is also anticipating demand from makers of medium-sized machinery for forestry and road building.

As well as trade credit insurance, Finnvera is open to assuming bank risk and will consider letter of credit (LC) guarantees so long as there is a correspondent banking partner in Ukraine.

“It remains to be seen how much demand we will see. Are the exporters able to have LC as a method of payment for Ukraine? Are banks able to do these transactions?” Pietikäinen tells GTR.

Finnvera says it can also theoretically support medium to long-term transactions, as well as investments in Ukraine, for war-related risks.

But in practice, there are limitations.

“Export credit guarantee decisions must be made in 2024 so there is a limitation for medium to long-term transactions because they might not be ready for signing by the end of the year,” Homanen notes.

Finland is also set to launch a blended finance instrument for the Ukraine market, expected by 2025 or 2026.

The Ukraine Investment Facility will be modelled on the Finnish government’s existing public investment facility and is expected to support projects worth up to €50mn.

Under the facility, Finnvera would guarantee a commercial bank loan to the Ukrainian government, or a state-owned entity, allowing the public firm to invest in a reconstruction project.

Finland’s Ministry for Foreign Affairs would pay the interest on the loan and part of the transaction to satisfy a 35-50% grant element required by OECD Arrangement rules for publicly funded export credits.

“The idea would be to help the Ukrainians to rebuild the public sector. It’s only for public projects, and really, the risk from our point of view would be the sovereign in Ukraine,” Pietikäinen says.